Warren Edward Buffett is an American investor, businessman and philanthropist and is the largest shareholder and CEO of his investment vehicle, Berkshire Hathaway. He is ranked by Forbes as the second-richest person in the world, behind the Microsoft co-founder Bill Gates.
As on February 2007, the value of his stake in Berkshire Hathaway was valued upwards of $50 bn.
In June 2006, he made a commitment to give away his fortune to charity, with 85% of it going to the Bill and Melinda Gates Foundation.
Investment Philosophy:
Buffett’s investment philosophy had the following key tenants:
· Invest in companies with a large economic moat (high degree of competitive advantage) which is reflected in its ability to raise prices of its products over a period of time.
· Invest with in your circle of competence (invest in companies and businesses you understand)
· Invest only for the long term. Buffet immortalized long-term investing by following quote – “my favorite holding period is forever”.
· Invest in businesses with a consistent and high absolute return on capital employed, which should be reflected in a market price to book value of greater than one (a company should generate more than $1 for every dollar invested in business)
· Invest a price which provides a very high margin of safety (purchase your investment a huge discount to its intrinsic value)
· Intrinsic value of a business is equal to the present value of all the future cash that can be taken out of that business
· Focus on Owner Earnings (free cash flow) in valuing a business.
Monday, August 07, 2006
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